The 'Kyle Bass' Trade And How The Penny Cost Taxpayers $436mm

It has been a few years since Kyle Bass suggested the 'nickel trade' and the idea remains as profitable for those with large wheel-barrows now as it ever was. As Bloomberg notes, the penny currently costs almost 2 cents to make and the nickel more than 10 cents - more than double the cost from 2006. In those seven years, the US taxpayer has lost a stunning $436 million thanks to the inflationary devaluation of the USD relative to the metals involved, and while a former Arizona congressman (Jim Kolbe) tried to sponsor a bill to abolish the penny (to save the cost of minting), President Obama noted that "given all the big issues, we're not able to get to it," even as the Canadian Mint just stopped distributing pennies - saving $11mm annually. It seems, while the production process may have costs, the 100% markup for pennies and nickels remains an intriguing disconnect.

Nice. If I may add, I just read that Thermite is a 50/50 mix of iron (III) oxide (aka rust) and powdered aluminum. You can light it with a July 4th sparkler. Add a little magnesium and ratchet up the fun.

Mrs. Horseman has been digging around out there quite a bit, but I am not sure what she has planted for this go 'round. Here is last night's carrot soup and garden salad with real ginger dressing. I do know that to say we are long lettuce at this time is an understatement.

Here is one of the little horsemen transfering some black gold from the Chateau du Poulet to Compost Pile 3-A, Block 12, Sublevel 2.

cool, hard to get my little 1100-tactical-,410's going but they get better as they get older. I have a feeling bugs will be bad this year , no winter to speak of in the hill country this year. I like NEEM OIL do you have a secret recipe that might be a little easier on the fiatscos?

It must have been luck then when I separated $10 dollars worth of pennies (20 rolls) and found on average that 24.9% were pre 1982... I like to think of them as 1/2 nickles as they're worth 2.45 cents each or so I thought at the time I did this which was a while ago.

Only in this damn country can people think that using Dollar denominations (a false weight and measure) that creates an illision of "to expensive to continue" is not worth the resources it extracts. Whereas in reality worthless paper extracts real resources because ingnorat sluts have confidence in the false weight and measure. THANKS PUBLIC SCHOOLS!

The rumors, and just rumors, I have heard is that early in 2013 the Mint will stop making the pennies and nickels here. While it *my* not be worthwhile to sort pennies for the copper ones (1981 and before), it is easy to just throw nicklels into the jug... Or just go to the banks and get $100 worth whenever you have the inclination.

fucking Kernan was talking about record gas prices. Instead of recognizing it for what it is--inflation--he saw the deflationary effects of the high price, declaring that the Fed would need to keep the rates low because of it. MIT degree or not, that is just dumb god damned logic.

Nickels are a great arbitrage play. It's not like you're making any money in your savings account, so you may as well hold some of that in nickels. They have the added bonus of being extremely hard to steal, as they weigh a ton.

lol i actually thought about penny hoarding. the only prob is that it costs more in gas to transport them then the profit margin togain. jusr imagine 10k in profit would require almost 700,000 pennies at a 1.5cent conversion

They should be FORCED to continue minting pennies (and for that matter they should be the 100% copper they once were).

The enemy here is not "the penny", not "the cost" nor the goal "saving taxpayers money". The enemy is CURRENCY DEBASEMENT and the penny should be maintained as a reminder that the real villains are GOVERNMENTS.

"...In those seven years, the US taxpayer has lost a stunning $436 million thanks to the inflationary devaluation of the USD relative to the metals involved..."

talk about majoring in the minors and re-arranging deck chairs on the titanic, this farticle rises to imbecility....removing the penny is pure fraud.....the same with a nickel.....how many items jump by more than 5% in price because of that stupid move? not everything which loses money should be ended, including the post office.....there truly are some services which should be maintained at a loss....

with 1.5 trillion usd deficits, whining about an average 60 million usd loss per year is the biggest sanctimonious horse shit i have heard in a long time....

if you want to save real money, slash and burn the cia, defense, debt, and bureaucrats.....that would be savings you could crow about....in the mean time, we will have to listen to this chicken shit about the cost of the penny and the post office.

It is unfortunate that copper, zinc, and nickel have gone up in price.

What we need is for everybody to wear WIN buttons. (for "Whip Inflation Now")

Those buttons bring prices down, which is what causes inflation. This was one of the good ideas that Gerald Ford (American President and frequent star on Saturday Night Live) came up with. It worked in the 70's, and helped get him re-elected.

Many of the world's government mint coins are sold at a loss .... paper markets are a rip off .... crocked government casino with bottomless pockets .... even Monedas could make money with those advantages .... while mint coins are heavily subsidized .... moral .... buy phizz govmint coins .... it's a no brainer ! While they are auditing US gold .... let's see a "real" audit of the US and Canadian mints .... nevah gonna happen ! Monedas 1929 Comedy Jihad World Tour Fatwas issued while you wait !

I'm afraid that the penny and the nickel are doomed. But we don't really need them. In the 1960's, a penny had at least as much purchasing power as the dime does now. For example, four pennies would buy a first class stamp and 25 pennies would buy a gallon of gas. Now, four dimes will get you a first class stamp and 25 dimes will NOT get you a gallon of gas.

We don't need pennies and nickels and whenever the melt value of a coin becomes significantly higher than its face value, people start hanging onto them and they cease to circulate.

When I was a kid, a nickle would buy a pack of gum (five sticks of Juicy Fruit [probably real sugar]. Or was it ten sticks?). Ten cents bought a large(ish) candy bar. Four ounces? Six? Eight even? Can't recall. This was 1960 +- or thereabouts. Twenty-five or fifty cents was some real money for a kid back then.

They often cite how it is illegal to melt down, or otherwise destroy, coins...so he'll never be able to truly benefit from it...

The way I see it, he really can't lose on it...at least if you consider the two extreme outcomes of all of "this."

If (when?) we eventually experience a legit currency crisis, and we pretty much go SHTF, no one is going to give a damn about laws like that...and the nickels will hold their value to at least some degree because of the raw materials...assuming of course he/his clients have physical possession of them...

...and if we ever let true deflation ever take hold (like we should have done in '08), the nickels will go up in value as a currency.

Either way, he has succeeded in at least preserving some of the wealth of his clients - and if you listen to his various speeches, etc., that's what he's really trying to do. He's not necessary trying to make a killing on each and every "bet" he places.

I THINK the only way he could "lose" on this bet is if we see a steady, controlled "inflation" - but IMHO, that's less likely to happen than either of the two "extreme" outcomes. Shit, Japan has been trying to do inflate their way out of their debt problems for 20 years...and all they're done is add more debt....

Yes...it is currently illegal to "melt" coin. But if you did, there's not a recycler in the US that's going to question where you big block of copper came from. Though, with nickels at 75% copper, they may want to assay it first....and you won't be able to melt this on your kitchen stove.

For the fun of it, I've purchased a few hundred pounds of pennies from "sorters" like pennybullion.com. They pull the pre-1982 pennies. There are other sorters on ebay.

Out of rebellion, I throw every other penny I get into the trash, or into the street to show others how worthless it is, and to force the US Treasury to spend a few cents to remake and redistribute replacement pennies.

Maybe the U.S. Government should get their penny and nickel and the rest of the coinage made in China in order to save money (they let Corporations destroy America this way).Or even better,sell the U.S. Mint to China.I was reading today that the Chinese have already bought enough oil and gas assets worldwide that the production from the assets is more than Saudi's now.Seems like everybody is selling out to them.

China is converting all the $US they've gotten making crap for us into HARD ASSETS, knowing damn well that the value of the dollar is tanking. China is converting dollars into equity stakes in Australian and South American mines, African farmland and energy sources all over the world.

Keep harping on it, you dipshit. If you keep calling the USGov stupid long enough, they're finally going to cave and start making our money like those toxic, smelly slugs that come out of Europe. Ever jangle a handful of Euro fractional coins compared with a handful of US coins? Ever get a whif of Euro coins? As a taxpayer, I'm happy to have some of my tax money go to making sure our coinage isn't skanky and slug-like.